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US power outlook: Slow growth through 2050, gas prices remain wild card

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US power outlook: Slow growth through 2050, gas prices remain wild card

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According to the U.S. government's annual energy forecast, domestic electricity use is expected to grow steadily through 2050 across all sectors after decades of slowing growth. Natural gas prices will determine how much coal and nuclear capacity survives through 2030 and beyond, according to the "2018 Annual Energy Outlook" from the U.S. Energy Information Administration.

Electricity demand will slowly rise in the coming decades thanks to economic growth after falling in 2017, the report concluded.

According to the recently released report's reference case, the average annual growth in electricity demand will reach about 0.9% from 2017 top 2050, with direct-use generation outpacing retail sales as a result of widespread adoption of rooftop solar and natural gas-fired combined heat and power.

Some experts disagree. The Outlook "says that even though load growth has been flat/negative through the entire [economic] recovery, load will magically start growing again," tweeted Michael Wara, director of the Climate and Energy Policy Program at the Stanford Woods Institute for the Environment. "At some point you have to look at the world/data instead of your map/model."

Through 2050, the EIA's report projects electricity prices remaining flat, ranging between an average of 10.6 and 11.8 cents per kilowatt-hour, largely determined by natural gas prices, and reaching a low of 10.1 cents/kWh or a high of 12.7 cents/kWh by 2050.

New capacity additions in the coming years will be driven by "the retirements of older, less-efficient fossil fuel units, the near-term availability of renewable energy tax credits and the continued decline in the capital cost of renewables, especially solar photovoltaic," said the report. "Low natural gas prices and favorable costs for renewables result in natural gas and renewables as the primary sources of new generation capacity. The future generation mix is sensitive to the price of natural gas and the growth in electricity demand."

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Generation costs, which represent the largest component in electricity prices, are projected to fall 10% from 2017 to 2050. That decline will be offset by a projected 24% increase in transmission costs and 25% hike in distribution costs as aging infrastructure gets replaced and the grid is upgraded to meet changing reliability standards.

Grid upgrades

Differences in fuel prices under the report's different scenarios will result in significantly different generation mixes, said the report. While fuel prices in the near term will expand natural gas-fired plants' share of total generation at the expense of costlier coal-fired generation, in the longer term, the relatively low cost of coal will mitigate the decline of coal-fired generation. An estimated 1,200 billion/kWh will come from coal plants by 2050, EIA projects, compared to almost 2,000 billion/kWh for natural gas, roughly 1,600 billion/kWh from renewables and 600 billion/kWh from nuclear.

The report foresees continued declines for the beleaguered nuclear industry. EIA projects further nuclear plant retirements as natural gas prices continue to decline and revenues in competitive power markets fall. The report's reference case projects a steady 20% decline in nuclear capacity from 99 GW in 2017 to 79 GW in 2050, if no new reactors come online after 2020. Significantly lower natural gas prices could lead to the closure of an additional 24 GW of nuclear capacity by 2050.

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The report projects total coal-fired capacity will fall by an additional 65 GW by 2030 before leveling off near 190 GW. Lower natural gas prices would increase those retirements another 19 GW by 2030, leaving a total coal capacity of 157 GW by 2050. Adoption of the Clean Power Plan or similar emissions restrictions by regional and state authorities would result in 15 GW of additional coal plant retirements by 2030 and 19 GW by 2050.